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Published: July 15, 2023
Updated: July 15, 2023

India Reimposes Windfall Tax on Petroleum Crude Amid Rising Global Oil Prices

The Indian government has taken a significant step by reintroducing the windfall tax on petroleum crude, effective from 15th July. This decision comes after a two-month gap, as stated in a recent notification issued by the Union Finance Ministry. With the aim of addressing the impact of rising global oil prices, the tax increase is expected to generate revenue and stabilise the market.

Rising Global Oil Prices Trigger Tax Reimposition:

In response to the soaring international Brent crude futures, which have reached their highest level in almost three months, the government has decided to reintroduce the windfall tax. The tax rate on crude petroleum, previously reduced to zero from ₹4,100 per tonne in May 2023, will now be raised to ₹1600 per tonne.

A Series of Tax Adjustments:

The windfall tax on petroleum crude has been subject to several adjustments in recent months. On 1st May, the government reduced the tax to ₹4,100 per tonne from ₹6,400 per tonne. Prior to that, on 19th April, the tax was increased to ₹6,400 per tonne. In another move, on 4th April, the windfall tax was completely removed, which had previously stood at ₹3,500 per tonne. These adjustments reflect the government's efforts to strike a balance between industry needs and market stability.

Continuity of Zero Windfall Tax:

Despite the recent changes, it's worth noting that on 17th June, the government decided to maintain a windfall tax rate of zero. This decision was based on the assessment that no fresh notification was necessary, as the previous rates of nil windfall tax would remain in effect.

Objective and Impact:

The reimposition of the windfall tax on petroleum crude aims to address the challenges posed by rising global oil prices. By levying this tax, the government intends to generate additional revenue while safeguarding the interests of both the industry and the overall economy. The increased tax rate will contribute to market stability and provide relief from the impact of rising oil prices.

In response to the surging global oil prices, the Indian government has reintroduced the windfall tax on petroleum crude after a two-month hiatus. By adjusting the tax rate to ₹1600 per tonne, the government aims to strike a balance between industry demands and market stability. This move will help generate additional revenue while mitigating the impact of rising oil prices on the economy.